Same Creditor: Sold-Out Junior May Obtain Deficiency Judgment Following Nonjudicial Foreclosure of Senior Lien

  In Black Sky Capital, LLC v. Cobb, the California Supreme Court holds that Code of Civil Procedure section 580d—that prevents a foreclosing creditor at a nonjudicial foreclosure sale from collecting a deficiency judgment—does not prevent the same creditor holding two deeds of trust on the same property from recovering a deficiency judgment when its junior lien is extinguished by the nonjudicial foreclosure of its senior lien.

  The senior and junior liens were executed in separate transactions, more than two years apart. There was no evidence of loan-splitting such that the question might arise of whether the two liens held by the same creditor should—in substance, if not in form—be treated as a single lien within the meaning of section 580d. Absent any evidence of gamesmanship the plain wording of Section 580d does not bar a deficiency judgment based on the sold-out junior lien.

  The decision disapproves the following cases to the extent they hold otherwise:   Bank of America, N.A. v. Mitchell (2012) 204 Cal.App.4th 1199; Ostayan v. Serrano Reconveyance Co. (2000) 77 Cal.App.4th 1411; Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540; and Simon v. Superior Court (1992) 4 Cal.App.4th 63.

  Mr. Daymude consults with clients and accepts cases involving deeds of trust, foreclosure sales, sold-out junior lien holders and deficiency judgments. For other types of cases accepted, please scroll the Home and My Practice pages. If you are seeking legal representation, call Michael Daymude at 818-971-9409. Have a question about this post? Write a comment.

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